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KARACHI: Former finance minister Miftah Ismael, who drew up the last budget approved in May, severely criticised the Pakistan Tehreek-i-Insaf government for undoing the ban on non-filers of tax returns from buying property and new cars.

“This is a very negative step,” he told Dawn after the mini-budget was announced.

“When we introduced this ban, there was a lot of lobbying from the auto sector and property developers for reversing it, but we stood our ground. It seems the PTI couldn’t stand up to these interests.”

He said the tax regime should move such as to further constrain the space for non-filers, while providing incentives to people to come into the tax net. “In the years to come, we would have made it impossible for non-filers to even have a bank account or buy tickets to travel on foreign airlines. We should constantly be tightening this noose, but instead they’ve reversed it completely.”

Terms undoing ban on non-filers of tax returns ‘very negative step’

At the same time, he claimed, his budget had reduced the top marginal tax rate from 30 to 15 per cent for salaried people as well as individuals who own business. “They have taken it back to 29pc, which is very wrong,” he said, adding that the reason for that step was to encourage people to come into the tax net.

He said that for years the PTI had been saying that indirect taxes were the wrong way to go because they burdened the poor, “yet today we saw them introduce Rs93bn indirect taxes like regulatory duties”.

“I’m happy about cigarette and mobile phone taxes,” he said, but added that his experience in government taught him that using regulatory duties as revenue measures could raise the cost of doing business.

He also took issue with Finance Minister Asad Umar’s characterisation of the last budget as “unrealistic”. “He says we underestimated expenditures by Rs250bn, so show us where. Which expenditures are underestimated? Every single penny we were going to spend was accounted for.”

Likewise, with the revenue side, he said, last year’s revised revenue estimates were Rs3,935bn. “On that Rs3,935bn I added another Rs500bn, which is a 12.7pc increase. Hardly unrealistic, given GDP growth, the devaluation of the exchange rate that raises rupee collection since most revenue is collected at the port, and the tax revenue inflows from the amnesty scheme.” The amnesty alone could bring in a percentage point worth of revenue, he said.

Published in Dawn, September 19th, 2018